4 Reasons Why CFOs Are Automating Their Accounting Processes

Going into 2023, Deloitte’s Q4 2022 North American CFO Signals survey revealed that one in three Chief Financial Officers (CFOs) anticipated economic challenges and a possible recession as the major constraint to achieving their companies’ financial performance goals. Despite this gloomy outlook, the survey reported that 79% of CFOs expected to implement more automation/digital technologies into their processes.

The answer lies in the growing demands of the finance function. The list of challenges facing businesses seems to grow with every passing quarter, and CFOs and their teams are increasingly expected to act as key partners to business operations. This means spending more time providing the CEO and other leaders with critical insights and decision support and less time on transactional finance. This also means reducing costs and investing in technology to automate core business processes, and accounting is often the best place to start.

In no particular order, here are 4 reasons why CFOs everywhere are automating their accounting processes:

In 2022, Gartner surveyed 155 finance executives on their 2025 goals for the financial close. The majority of respondents identified general aims for improvement and over half revealed the goal of an autonomous financial close process:

- 86% said they want a faster, real-time close
- 68% said they want a cheaper close
- 64% said they want an error-free close
- 55% said they want a touch-free close

While a touch-free close is largely just an ambition at the moment, many CFOs have already achieved a faster, real-time close by standardizing their processes and applying automation to repetitive tasks and threshold-dependent use cases.

CFOs that have done so tend to lead top-performing organizations and see significant savings of time and money, so they are spending a lower percentage of their revenue on the finance function and freeing their “teams from low value-added activities so they can be redeployed into value-added business advisory roles.” On average, these organizations spend three times less on their finance function than those that haven’t optimized their processes.

Gartner’s 2023 CEO Survey identified technology and digital transformation as the #2 priority for CEOs, with a special focus on AI and process automation. As expected, growth is the #1 priority for CEOs, but it’s far from being mutually exclusive to investment in digital transformation, as 89% of boards claim we are “in a post-digital world; i.e., digital is an implicit part of growth strategies.”

A recent study by Harvard Business Review highlights the importance of technology and digital transformation to current business growth, comparing average annual shareholder returns of digital “leaders” to those of digital “laggards” across the global banking industry. From 2018 to 2022, digital leaders in global banking saw 8.1% in average annual shareholder returns versus 4.9% for laggards. Additionally, total operating expenses of digital laggards grew at 2.3% per year, nearly twice that of digital leaders (1.3% per year).

The CFO’s investment in technology also contributes to the #3 priority for CEOs – recruiting and retaining top talent. The Journal of Accountancy recently cited a survey of 267 CFOs across the U.S., EMEA, and APAC, revealing that 99% of CFOs who are prioritizing digital transformation agree that technology will be crucial to their ability to attract and retain employees.

Another survey by the Association of International Certified Professional Accountants showed that finance and accounting roles have virtually no interest in information activities, like data aggregation and transactional ticking and tying, and would rather shift their focus to delivering insight, influence, and impact to their organizations. This sort of sea change in the role of accounting and finance is only possible through the automation of repetitive core processes.

The current shortage of accountants entering the workforce even further stresses the importance of investment in technology. In December 2022, The Wall Street Journal reported that over “300,000 U.S. accountants and auditors have left their jobs in the past two years, a 17% decline,” and that the declining number of accounting bachelor’s graduates won’t be able to fill the vacancies.

Some of this decline across the profession can be attributed to retirements. However, a recent survey of 1,400 college students on their perceptions of the accounting profession revealed that when compared to other careers, most undergraduates view accounting careers as requiring longer hours per week and having less interesting day-to-day responsibilities. These perceptions are largely due to accounting’s traditional association with repetitive, time-consuming processes, many of which can now be automated and digitally optimized.

The past three years have produced the most volatile economic environment since The Great Recession. The sharp economic contraction caused by the COVID-19 pandemic was quickly followed by supply chain disruptions, inflation, rising interest rates, geoeconomic confrontations, energy crises, extreme weather events, failing banks, and labor shortages, which have been especially pertinent to finance and accounting teams.

These challenges have stressed the demand for real-time insights into financials to enable proactive, data-driven decisions that will eliminate risk and maximize profitability. Gartner’s 2023 Survey of Top 5 Priorities for Corporate Controllers revealed that a top priority for the controllership is to reevaluate its own scope and structure, so that its value is aligned to support judgment-based and decision-enablement workstreams for the larger CFO organization.

It goes without saying that traditional accounting practices are incompatible with this demand for accurate, real-time insights. Although a lot has changed over the past several years, a 2019 survey of 1,100 C-level executives and finance leaders across the U.S., EMEA, and APAC found that 69% of respondents believed that their CEO/CFO had used incorrect or out-of-date financial data to make significant business decisions. Manual input processes and too many disconnected data sources were identified as the leading reasons for error.

As organizations must embrace even greater influxes of data across different systems, our business environment becomes even more complex, and finance and accounting face a shortage of talent, the controllership’s ability to eliminate risk, consolidate financial data, and enable decision-support for the office of the CFO can only be made possible through the digital transformation of core financial processes. For a first-hand account of how making a change is helping other finance leaders navigate those demands, tune in to this webinar: Controllers Council - The Future of Accounting: Insights from Industry Leaders.